This problem can be fixed by temporarily launching the game using a "-LOWMEM" parameter.
Locate the configuration file dosbox_LOL2_single.conf in the game's installation directory.
By default, Lands of Lore 2 installs to C:\GOG Games\Lands Of Lore 1 and 2\Lands of Lore 2.
You can open the dosbox_LOL2_single.conf file using any basic text editor, such as Notepad.
Locate the section labeled [autoexec], and change the line:
lolg.exe -CD ..
lolg-exe -CD .. -LOWMEM
The game should no longer crash when entering the Tavern.
You can safely remove the -LOWMEM parameter after finishing this section of the game.
Note, that some graphical settings will still be set to LOW following these steps, and will have to be manually readjusted in-game using the Options > Video Controls menu.